SPAR Group Announces Financial Results for the Fourth Quarter and Twelve Months Ended December 31, 2019
Highlights for the three- and twelve-month periods ended
- Revenue for the fourth quarter of 2019 increased
$4.1 million , or 7.1 percent, to$61.1 million . International operations increased$4.2 million year-over-year, primarily due toBrazil ,Mexico , and South Africa. - Revenue for the twelve-month period ended
December 31, 2019 increased$23.7 million , or 10.3 percent, to$252.9 million . Domestic operations contributed$10.7 million of the year-over-year revenue growth, due primarily to an increase in project revenue. International operations contributed$13.0 million of the increase, driven primarily by the growth inBrazil ,Mexico ,Canada andJapan . - Operating income for the fourth quarter of 2019 decreased
$728,000 to$1.2 million , compared to$1.9 million for the same period last year. - Operating income for the twelve-month period ended
December 31, 2019 more than doubled to$10.2 million , an increase of$6.5 million . The increase was driven by strong performance by both domestic and international operations. - Net loss attributable to SPAR Group for the fourth quarter of 2019 was
$(626,000) , or$(0.03) per share, compared to a net loss of$(534,000) , or$(0.03) per share, during the fourth quarter of 2018. - Net income attributable to SPAR Group for the twelve-month period ended
December 31, 2019 was$2.4 million , or$0.12 per diluted share, compared to a net loss of$(1.6 million) , or$(0.07) per diluted share, during the same period last year. - As highlighted in the GAAP reconciliation table below, the Company incurred significant non-cash and one-time charges during 2018. Excluding non-cash and one-time charges, non-GAAP net income attributable to SPAR Group during 2018 was approximately
$1.3 million or$0.06 per diluted share.
Financial Results by Geography (in 000's, except per share data)
Three Months Ended |
% | Twelve Months Ended |
% |
||||||||||||||||
Revenue: | 2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||||||
International | $ | 43,476 | $ | 39,289 | 10.7% | $ | 162,156 | $ | 149,142 | 8.7% | |||||||||
Domestic | 17,577 | 17,711 | nmf | 90,720 | 80,049 | 13.3% | |||||||||||||
Total | $ | 61,053 | $ | 57,000 | 7.1% | $ | 252,876 | $ | 229,191 | 10.3% |
Three Months Ended |
% | Twelve Months Ended |
% | |||||||||||||||
Operating Income/(Loss): | 2019 | 2018 | Change | 2019 | 2018 | Change | ||||||||||||
International | $ | 3,000 | $ | 3,320 | (9.7 | %) | $ | 7,373 | $ | 6,272 | 17.6% | |||||||
Domestic | (1,816 | ) | (1,408 | ) | nmf | 2,818 | (2,543 | ) | nmf | |||||||||
Total | $ | 1,184 | $ | 1,912 | (38.1 | %) | $ | 10,191 | $ | 3,729 | 173.3% |
Three Months Ended |
Twelve Months Ended |
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Net income (loss): | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||||
International | $ | 905 | $ | 821 | 10.1% | $ | 1,764 | $ | 1,529 | 16.5% | ||||||||||||||
Domestic | (1,531 | ) | (1,355 | ) | nmf | 655 | (3,080 | ) | nmf | |||||||||||||||
Total | $ | (626 | ) | $ | (534 | ) | nmf | $ | 2,419 | $ | (1,551 | ) | nmf | |||||||||||
Earnings Per Basic Share: | $ | (0.03 | ) | $ | (0.03 | ) | $ | 0.12 | $ | (0.07 | ) |
“We delivered across-the-board improvement in financial results during 2019, with solid top-line organic growth, as well as a significant improvement in profitability both domestically and internationally. Greater operating efficiencies, operating leverage and disciplined cost control resulted in 18% growth in international profitability and restored meaningful profitability to our domestic operations. Domestic revenue benefited from new customer acquisitions, as well as growth from existing accounts. The increase in international revenue was led by strong organic growth in
Margin Profile by Geography
Gross Margin:
Three Months Ended |
Basis Point |
Twelve Months Ended |
Basis Point |
|||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||
International | 20.2 | % | 22.4 | % | (220) | 17.2 | % | 17.1 | % | 10 | ||||
Domestic | 18.7 | % | 19.6 | % | (90) | 23.5 | % | 23.5 | % | - | ||||
Total | 19.7 | % | 21.5 | % | (180) | 19.5 | % | 19.3 | % | 20 |
Operating Income as a % of Sales
Three Months Ended |
Basis Point |
Twelve Months Ended |
Basis Point |
|||||||||||
2019 | 2018 | Change | 2019 | 2018 | Change | |||||||||
International | 6.9 | % | 8.5 | % | (160) | 4.6 | % | 4.2 | % | 40 | ||||
Domestic | (10.4 | %) | (8.0 | %) | (240) | 3.1 | % | (3.2 | %) | 590 | ||||
Total | 1.9 | % | 3.4 | % | (150) | 4.0 | % | 1.6 | % | 240 |
International gross profit margin for the three- and twelve-month periods ended
Domestic gross profit margin for the three-month period ended
Balance Sheet as of
As of
Non-GAAP Financial Measures & Key Metrics
In addition to disclosing financial measures prepared in accordance with GAAP, this press release and the accompanying tables contain certain non-GAAP financial measures.
Non-GAAP financial measures do not have any standardized meaning and are therefore unlikely to be comparable to similarly titled measures presented by other companies. SPAR Group considers these non-GAAP financial measures to be important because they provide useful indicators of its performance and liquidity measures. These are key measures used by our management and board of directors to understand and evaluate our core operating performance and trends, to prepare and approve our annual budget and to develop short and long-term operational plans. In addition, investors often use similar measures to evaluate the performance of a company. Non-GAAP financial measures are presented for supplemental informational purposes only for understanding the company’s operating performance. The non-GAAP financial measures should not be considered a substitute for financial information presented in accordance with GAAP, and may be different from non-GAAP financial measures presented by other companies. The GAAP financial measure most directly comparable to each non-GAAP financial measure used or discussed, and a reconciliation of the differences between each non-GAAP financial measure and the comparable GAAP financial measure, are included in this press release after the consolidated financial statements.
Non-GAAP Net Income is defined as Net Income (loss) adjusted by removing the impact of one-time non-recurring charges.
About SPAR Group
Forward-Looking Statements
This Press Release contains and the above referenced recorded comments will contain "forward-looking statements" made by
The 2019 Annual Report includes a new Risk Factor respecting the coronavirus: Any outbreaks or rapid spread of such a contagious disease, or the fear of it, could significantly disrupt the retail operations of or the global and domestic supply chains for our customers and our work for them and could adversely affect the economies and financial markets of many countries, resulting in an economic downturn that could affect retail demand. Any of those events may change or disrupt the needs or demands of the Company's customers and could have a material and adverse effect on the Company or its performance or condition. See Risk Factors in the 2019 Annual Report.
The forward-looking statements made by the Company in this Press Release may include (without limitation) any expectations, guidance or other information respecting the pursuit or achievement of the Company's corporate strategic objectives (growth, customer value, employee development, greater productivity & efficiency, and earnings per share), building upon the Company's strong foundation, leveraging compatible global opportunities, growing the Company’s client base and contacts, continuing to strengthen the Company’s balance sheet, growing revenues and improving profitability through organic growth, new business developments and strategic acquisitions, and continuing to control costs. The Company's forward-looking statements also include, in particular and without limitation, those made in "Business", "Risk Factors", "Legal Proceedings", and "Management's Discussion and Analysis of Financial Condition and Results of Operations" in the 2019 Annual Report and 2018 Annual Report. You can identify forward-looking statements in such information by the Company's use of terms such as "may", "will", "expect", "intend", "believe", "estimate", "anticipate", "continue", "plan", "project" or similar words or variations or negatives of those words.
You should carefully consider (and not place undue reliance on) the Company's forward-looking statements, risk factors and the other risks, cautions and information made, contained or noted in or incorporated by reference into this Press Release, the 2019 Annual Report, the 2018 Annual Report, the Proxy Statement and the other applicable SEC Reports that could cause the Company's actual performance or condition (including its assets, business, clients, capital, cash flow, credit, expenses, financial condition, income, liabilities, liquidity, locations, marketing, operations, performance, prospects, sales, strategies, taxation or other achievement, results, risks, trends or condition) to differ materially from the performance or condition planned, intended, anticipated, estimated or otherwise expected by the Company (collectively, "expectations") and described in the information in the Company's forward-looking and other statements, whether express or implied. Although the Company believes them to be reasonable, those expectations involve known and unknown risks, uncertainties and other unpredictable factors (many of which are beyond the Company's control) that could cause those expectations to fail to occur or be realized or such actual performance or condition to be materially and adversely different from the Company's expectations. In addition, new risks and uncertainties arise from time to time, and it is impossible for the Company to predict these matters or how they may arise or affect the Company. Accordingly, the Company cannot assure you that its expectations will be achieved in whole or in part, that the Company has identified all potential risks, or that the Company can successfully avoid or mitigate such risks in whole or in part, any of which could be significant and materially adverse to the Company and the value of your investment in SGRP's Common Stock.
You should carefully review the risk factors described in the 2019 Annual Report and 2018 Annual Report (See Item 1A – Risk Factors) and any other risks, cautions or information made, contained or noted in or incorporated by reference into the 2019 Annual Report, the 2018 Annual Report, the Proxy Statement or other applicable SEC Report. All forward-looking and other statements or information attributable to the Company or persons acting on its behalf are expressly subject to and qualified by all such risk factors and other risks, cautions and information.
The Company does not intend or promise, and the Company expressly disclaims any obligation, to publicly update or revise any forward-looking statements, risk factors or other risks, cautions or information (in whole or in part), whether as a result of new information, risks or uncertainties, future events or recognition or otherwise, except as and to the extent required by applicable law.
Consolidated Statements of Income (Loss) and Comprehensive Income (Loss)
(In thousands, except share and per share data)
Three Months Ended |
Twelve Months Ended |
||||||||||||||
2019 | 2018 | 2019 | 2018 | ||||||||||||
Net revenues |
$ | 61,053 | $ | 57,000 | $ | 252,876 |
$ | 229,191 | |||||||
Cost of revenues | 49,010 | 44,750 | 203,626 | 184,904 | |||||||||||
Gross profit | 12,043 | 12,250 | 49,250 | 44,287 | |||||||||||
Selling, general and administrative expenses | 10,230 | 8,879 | 36,869 | 34,188 | |||||||||||
Settlement and other charges | - | 945 | - | 4,261 | |||||||||||
Depreciation and amortization | 627 | 514 | 2,190 | 2,109 | |||||||||||
Operating income | 1,186 | 1,912 | 10,191 | 3,729 | |||||||||||
Interest expense | 441 | 209 | 1,046 | 1,095 | |||||||||||
Other expense (income), net | 2 | 8 | (266 | ) | (406 | ) | |||||||||
Income before income tax expense | 743 | 1,695 | 9,411 | 3,040 | |||||||||||
Income tax expense | 833 | 1,067 | 3,578 | 1,402 | |||||||||||
Net (loss) income | (90 | ) | 628 | 5,833 | 1,638 | ||||||||||
Net income attributable to non-controlling interest | (534 | ) | (1,162 | ) | (3,414 | ) | (3,189 | ) | |||||||
Net (loss) income attributable to |
$ | (624 | ) | $ | (534 | ) | $ | 2,419 | $ | (1,551 | ) | ||||
Basic and diluted net (loss) income per common share: |
$ | (0.03 | ) | $ | (0.03 | ) | $ | 0.12 | $ | (0.07 | ) | ||||
Weighted average common shares – basic | 21,098 | 20,160 | 20,916 | 20,684 | |||||||||||
Weighted average common shares – diluted | 21,184 | 21,160 | 21,157 | 20,684 | |||||||||||
Net (loss) income | $ | (90 | ) | $ | 628 | $ | 5,833 | $ | 1,638 | ||||||
Other comprehensive loss: | |||||||||||||||
Foreign currency translation adjustments | 1,191 | 178 | 547 | (3,284 | ) | ||||||||||
Comprehensive income (loss) | 1,101 | 806 | 6,380 | (1,646 | ) | ||||||||||
Comprehensive income attributable to non-controlling interest | (1,316 | ) | (1,444 | ) | (3,939 | ) | (1,837 | ) | |||||||
Comprehensive (loss) income attributable to |
$ | (215 | ) | $ | (638 | ) | $ | 2,441 | $ | (3,483 | ) | ||||
Consolidated Balance Sheets
(In thousands, except share and per share data)
2019 |
2018 |
|||||
Assets | ||||||
Current assets: | ||||||
Cash and cash equivalents | $ | 10,458 | $ | 7,111 | ||
Accounts receivable, net | 51,095 | 46,142 | ||||
Prepaid expenses and other current assets | 2,404 | 1,879 | ||||
Total current assets | 63,957 | 55,132 | ||||
Property and equipment, net |
2,848 | 2,950 | ||||
Operating lease right-of-use assets | 4,948 | - | ||||
3,784 | 3,788 | |||||
Intangible assets, net | 2,796 | 3,332 | ||||
Deferred income taxes | 1,883 | 2,568 | ||||
Other assets | 1,115 | 1,325 | ||||
Total assets | $ | 81,331 | $ | 69,095 | ||
Liabilities and equity |
||||||
Current liabilities: | ||||||
Accounts payable | $ | 11,049 | $ | 8,668 | ||
Accrued expenses and other current liabilities | 18,493 | 18,168 | ||||
Due to affiliates | 4,645 | 4,645 | ||||
Customer incentives and deposits | 594 | 620 | ||||
Lines of credit and short-term loans | 8,932 | 10,414 | ||||
Current portion of operating lease liabilities | 2,828 | - | ||||
Total current liabilities | 46,541 | 42,515 | ||||
Operating lease liabilities, less current portion | 2,120 | - | ||||
Long-term debt and other liabilities | 1,300 | 1,806 | ||||
Total liabilities | 49,962 | 44,321 | ||||
Equity: | ||||||
Preferred stock, |
||||||
Authorized and available shares– 2,445,598 | ||||||
Issued and outstanding shares– | ||||||
None – |
– | – | ||||
Common stock, |
||||||
Authorized shares – 47,000,000 | ||||||
Issued shares – 21,102,335 shares – 20,784,483 shares – |
211 | 208 | ||||
1,697 shares – 7,895 shares – |
(2 | ) | (8 | ) | ||
Additional paid-in capital | 16,511 | 16,304 | ||||
Accumulated other comprehensive loss | (3,598 | ) | (3,638 | ) | ||
Retained earnings | 5,833 | 3,432 | ||||
18,955 | 16,298 | |||||
Non-controlling interest | 12,415 | 8,476 | ||||
Total equity | 31,370 | 24,774 | ||||
Total liabilities and equity | $ | 81,331 | $ | 69,095 |
GAAP to Non-GAAP Reconciliation (In thousands, except per share data) |
||||||
Twelve Months Ended |
Twelve Months Ended |
|||||
Net income (loss): | ||||||
GAAP net income (loss) | ||||||
One Time Charges | 3,780 | |||||
Tax Provision impact | (900) | |||||
Total non-GAAP net income | ||||||
Non-GAAP Earnings Per Basic and Diluted share: |
Company Contact:James R. Segreto Chief Financial OfficerSPAR Group, Inc. (248) 364-7727 Investor Contact:Dave Mossberg Three Part Advisors (817) 310-0051